FHA 203(k) requirements include 3.5 percent of the sum of the home's purchase price and repair cost as a down payment, plus the regular FHA loan eligibility requirements, including sufficient credit and stable income, notes Forbes. The home must meet maximum value and habitability standards, notes Investopedia.
If the a home that needs a repair of $20,000 costs $270,000 to buy, the borrower must raise 3.5 percent of $290,000, which is $10,150, as the down payment, as Forbes explains. The applicant needs a 500 minimum credit score to qualify for any FHA loan, including the FHA 203(k) loan, according to Investopedia. However, applicants with low scores may be required to pay as much as 10 percent down. Applicants with higher credit scores have higher chances of getting the loan than those with low credit scores.
Loan applicants must provide proof of steady income, says Investopedia. Typically, the proof should indicate that the borrower has had a stable employment for the two most recent years. In case of any employment gap during the 2 years, the gap should not have lasted for more than a month. Additionally, the employment should be likely to continue for a minimum of 3 years following the loan acquisition.